14 ASIAN LEGAL BUSINESS – MARCH 2024 WWW.LEGALBUSINESSONLINE.COM SUSTAINABLE FINANCE Hong Kong is no stranger to the effects of climate change. Its temperature increased at a rate of 0.28 degrees centigrade per decade during the period of 1993 to 2022 while, on average, the mean sea level at Victoria Harbour rose at a rate of 32 millimetres per decade during 1954-2022. In addition, in recent years the city have been experiencing more frequent and intense weather events, including a “once in 500 years” rainstorm in September last year. To build Hong Kong into a city of the future and support China’s goals under the Paris Agreement, the Special Administrative Region’s government has been leveraging its status as a financial giant to push its green finance initiative. “To support the global action on climate change, the financial sector has a key role to play. It can green the world by directing capital flows towards sustainable investments and away from highemitting industries, hence driving the transition to a sustainable future,” the Hong Kong Monetary Authority said in a May 2023 proposal for a prototype green classification framework for adoption in the local market. And the government has been backing up its green resolve with increasingly supportive measures. In November 2018, it launched the Government Green Bond Program, whose limit was increased to around $25 billion (HK$200 billion) in 2021. The government has also launched green bond frameworks in 2019 and in 2022. Hong Kong launched the world’s first ‘Global Medium Term Note Programme’ dedicated to green bond issuances by a government in 2021. in 2022, the government launched the Retail Green Bond with an issue size of $2.6 billion, making it the largest green retail bond issuance at the time. In 2023, it launched triple-currency green bonds raising $5.75 billion, making it Asia’s largest ESG bond issuance till date. As of July 2023, the government has successfully issued close to $22 billion (HK$170 billion) worth of green bonds under the GGBP. And in February 2024, it issued digital green bonds of around HK$6 billion denominated in Hong Kong dollars, Chinese yuan, U.S. dollars and euro. Allen & Overy, Ashurst and Linklaters were the firms advising on the issuance. This government-backed robust growth is making Hong Kong a sustainable finance hub in Asia and the globe, even as macroeconomic challenges are impacting the Hong Kong market, says Mayer Brown banking and finance partner Dion Yu. “There are various factors that can support Hong Kong’s development into a green finance hub. There is strong commitment and support from the Hong Kong government to develop Hong Kong into an international centre for green technology and finance. Further, Hong Kong has close ties with Mainland China, and could scale access to international finance for Mainland China. For example, the Stock Exchange of Hong Kong Limited has been a major venue for Mainland China’s offshore green bond listings,” notes Yu. Despite challenging macroeconomic conditions for international bond market in recent years, Hong Kong was the largest centre for arranging Asian A SUSTAINABLE FUTURE Strong government intervention and a willing market is turning Hong Kong into a global sustainable finance hub, but it is far from reaching its full potential. BY NIMITT DIXIT